CASE STUDY Cost in use, not cost to buy...

Consider the following scenario. You sell heavy$-$duty electric pumps, used by a variety of manufacturing companies in a variety of plants. Your price is $40,000$ and has been for some time. One of your customers, your most important key account as it happens, has just informed you that there is a new kid on the block with a similar pump, selling at ${}_{36,000}.$ So what do you do$?$

First you might ask some questions:

Is it the same specification as yours?

More or less it seems.

Is the new supplier reputable?

Very.

Do they have similar terms and conditions?

Almost exactly.

Does their pump use the same amount of electricity?

I$\text{'}$m afraid it does $-$ so no 'cost$-$in$-$use' advantage there.

So do you give up at this point and reduce your price to match? Not if you are able to do a little more homework, using your contacts within the customer's supply chain. Maybe you discover the data shown in Table $12\mathrm{.}1,$ relating to your own product.

Table $12\mathrm{.}1$ Costs in use: the pump

Costitem

Total cost over $5$ vears